Just when you thought hearing about losses from UST/LUNA was over...
Stablegains Lawsuit
Stablegains is a platform that would allow customers to deposit crypto to earn 15% APY on their assets. The idea was to allow users to deposit assets and get the benefits of DeFi without all the things that come along with it. DeFi can be intimidating and hard to understand for the average user, so Stablegains was there to save them the headache of learning how to do it themselves. They advertised daily gains and 15% APY with the ability to deposit and withdraw freely via Circle...
What they didn't tell their customers was that they were depositing their assets into Anchor via UST. We're all familiar at this point with what happened in the Terra world with LUNA and UST. If not, basically the entire system imploded sending LUNA to $0.00010650 and the stable coin supposedly pegged to $1 called UST to $0.055.
There's a lot of speculation and allegations around that whole situation, but nothing has been confirmed aside from the fact that the founder Do Kwon is facing $78 million in fees for tax evasion. He's still trying to save the platform by forking it, but it won't work. Sorry bro. Terra is dead. Just let it rest.
So they were taking user's funds via deposits in USD and USDC... Paying them a stable gain of 15% APY based on their deposit... Depositing those funds into Anchor earning 20% APY on UST and pocketing the difference. This was the whole business model, and it was ingenious. It was fool proof, until it wasn't. When UST collapsed, they were 100% fucked.
At the time of the collapse, they were holding 47,611,058 UST in Anchor from nearly 5,000 different customers... Before the implosion of UST and the crash from $1 to 5 cents, this was worth over $47 Million and was earning 20%. Even after paying the 15% APY to their customers in daily gains, they were pocketing 5% of the compounded interest which was plenty free money for them. They were making shit tons of money off their poor customers that had no idea what was going on.
The value of their holdings from customer deposits crashed from $47 million to about $2 million nearly overnight. Obviously that was devastating to them as a business, but they can't really do anything about their customers' money. They even advertised on the front page of the website that their customers' assets would "stay stable regardless of market conditions". Big oof!
They are really trying to keep the trust of their customers by referring to this as an "ongoing event'. We all know that the UST depegging situation is over. It's dead. There's literally no chance that LUNA will recover which means that UST will never recover. They're really trying to cover their asses by putting all of the blame on Anchor, saying that it's because Anchor only supports UST.
Looking at the FAQ page for Stablegains is even more sad. They explain that withdrawing USD during the "UST depegging" will only get the users whatever the market value is of UST. Literally just letting them know that they won't be getting the full dollar value back that they deposited. Don't worry though, they offer you the ability to withdraw your UST instead of converting to USD... LOL
It's really disgusting that they did this with customer's funds. Now they're facing a huge class-action lawsuit for losing over $40 million in customers' funds. They claim to be registered as a Money Service Business with the FinCEN too so they are really in deep shit with this. There's literally no chance that the value of their customers' funds will return. They're better off filing bankruptcy or trying to win the lawsuit.
This is what happens when you trust a centralized service to manage your funds. They were essentially operating as a bank and gambling with the assets. RIP to their customers' funds and I hope the FinCEN is able to get customers at least some of their money back.